Spy pact to 'change business model': Indon

Gabrielle Dunlevy, Southeast Asia Correspondent

Indonesia is satisfied Australia will never again use its spies and surveillance to its neighbour's detriment, believing a new agreement will "change the business model" of intelligence.

The signing of the Joint Understanding on a Code of Conduct signals the resumption of co-operation on military, people-smuggling and policing that was suspended in November last year after revelations Australia had eavesdropped on the mobile phones of Indonesian President Susilo Bambang Yudhoyono, his wife, and close confidants.

The text of the document - which is less than two pages long - says both nations "will not use any of their intelligence, including surveillance capacities, or other resources, in ways that would harm the interests of the parties".

It then goes further, enshrining an annual meeting of the foreign affairs ministers, and regular consultation between the heads of intelligence agencies.

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Following the signing in Bali on Thursday, which the president witnessed, Indonesian foreign minister Marty Natalegawa told reporters he had every confidence the "all weather" agreement would stick, including after the change of administration in Indonesia in October.

Indonesia was very satisfied the text was clear and would encapsulate all forms of spying.

"We should not simply underscore the first element, the no-spying agreement bit, but also on the enhancement of intelligence co-operation," he said.

"Having enhanced intelligence co-operation will change the business model in a way, in the sense that there's no longer a need for any irregular or unlawful sharing of information or intelligence."

Australian foreign minister Julie Bishop earlier told reporters the new commitments would be important as both nations face the growing threat of terrorists returning from new fronts in the Middle East.

"We look forward to gaining the benefits of working more closely together," she said.

"Despite some recent challenges in our relationship, and there can be between neighbours, even strategic partners as close as Australia and Indonesia, we have proven that these countries can keep working together across a broad and diverse range of fields."

Leaks by US intelligence contractor Edward Snowden last November which revealed the previous Australian Labor government had spied on Dr Yudhoyono and his inner circle was an affront to the president.

At the height of the scandal, called the lowest point in bilateral relations since the East Timor crisis by some, there were ugly protests outside Australia's embassy in Jakarta, the Indonesian ambassador was recalled from Canberra, and there were calls from some corners to expel Australia's ambassador.

Dr Yudhoyono halted co-operation pending an agreement on paper.

However, Ms Bishop and Mr Natalegawa were in constant communication by text message as they negotiated the code over nine months.

Dr Yudhoyono had been keen to implement the code before leaving office in October, something he impressed on Prime Minister Tony Abbott when they met in Indonesia in June.

"I am hoping, personally, that we could go back to our strong relations and effective co-operation," he said.